Negotiating salary and benefits

poeticjustice

Registered User
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15
Hi,

I'm applying for a new job. I've been offered 85k per annum for a different job and I'm looking to get the other job to match or beat this offer as this is the role I'd prefer. They have indicated they are willing to match this.

I'm trying to find the most efficient way to get the deal packaged, through salary alone or through a lower salary but with benefits. I've enquired about the possibility of getting a company contributed pension to take advantage of tax relief and they have been trying to sell me on the idea of a profit share scheme. (At the moment the profit share could be worth approx. 10k per year (10%) and this is more unlikely to decrease anytime soon).

Am I correct in thinking that taking the 85k straight as salary doesn't seem like the best option due to the amount of tax I will be paying? Would I be better off asking for say 65-70k plus 10% contributory pension plus the profit share? Or is there a better way to bundle this package?

Thanks for your help.
 
There are probably tax qualified people on here who can give you specific mechanisms depending on the type of company, types of share schemes, whether you have a role as Director with shares etc.

But as a general rule of thumb - compensation in whatever form is taxable. So whether you get paid in salary or as benefit in kind - most forms of compensation creates a tax liability for you. The major exception to that is employers contribution to a pension scheme. If you are able to defer the income, maximising the employer contribution is the best as it is in effect tax free to you (until you draw it down of course). The second best is your contribution to the pension. The tax break for you is related to income (and age) - the higher your basic salary, the more you can contribute. And as far as I know, most non-cash benefits are excluded from this calculation. So if you were in a position to max out pension contribution, you would prefer a higher "salary" calculation rather than non-salary benefits

The profit share scheme - I don't know if it can be structured in a tax efficient way. That's needs expertise. But my assumption would be that it would be viewed as a bonus - so no tax benefit. Other than that, there may be some benefits which could be worth considering - health insurance is efficient I think. Also a small annual payment can be made as a gift (e.g. vouchers at Christmas I think).
 
The big one in my opinion is how much the employer contributes to your pension percentage wise. If they contribute anything above 5% I believe it is a good deal. Health is alright also if you have a family as you are effectively getting a 48% discount (as you pay BIK on it). ESPP is another if the company is floating, get's you a 15% gross guaranteed but you still pay 52% tax on the result.
 
If the approved share scheme is an option you get to buy up to €12700 quoted shares and get tax relief at marginal rate (no usc or prsi relief). If you hang on to them for 3 years they become available to you to hang on to or sell. Only cgt is payable if there is a gain.
 
A profit share scheme is a bad idea from an employees point of view, if the company hits the buffers you lose your job and your savings. Just ask anyone who was in any Bank scheme.

From a negotiating point of view I suggest maximising the salary, then asking for a pension contribution. Most employers look harder at salaries than pensions.

As a base line for future negotiations I also think you are better off as someone with €85k salary and a pension contribution even if small, rather than as someone on €65k with some kind of top up.

Also if you can afford to live on €65k, and you have a salary of €85k, you can contribute personally to a pension and save lots of tax.
 
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